Need 15,000 to 20,000 Square Feet – Off Market

 

No Space Available on the Market.

LAX Related Freight Company needs 10,000 to 15,000 Square Feet – Purchase or Lease

2 or 3 Docks; 2,000 SF of Office; Minimal Truck Parking – At Dock Only

3 to 5 year Term; Immediate Occupancy;

Willing to take fully demised space or will “share” under the right conditions.

Please contact: Jim Klein, SIOR

jimklein@kleincom.com; 310-493-0053

 

Industrial Building Outlook

The popularity of investing in industrial buildings is due to several factors. It provides both steady income and high returns through redevelopment. Market fundamentals are supportive with a lack of space and rising rents.   Industrial has a lower cost of operating than office and multi-family, a stable investment duration, provides diversification, and is supported by corporate credits.  Industrial is the primary beneficiary as retailers shift attention to ecommerce and away from stores. Redeveloping older industrial stock, moving capital to where it’s needed, and better information will open a vast opportunity of great industrial investments.

In industrial markets, Groupthink is misallocating capital. Institutional investors favor big box distribution, new construction, and large scale investments. For almost all other types of industrial real estate, financing is constrained. Industry focus is exclusively on supply chain and logistics, but technology and new production will provide increased opportunities to buy, renovate, and profit.

Adding Value – Buying and Renovating

Our nation’s stock of industrial buildings, just like infrastructure, is in a poor state of repair and both need substantial investment.  Buying and renovating is an excellent way to boost returns. Lack of space, the need for modern improvements, and outstanding locations, provide many ways to add value.

The evolving economy is influencing location dynamics. Being close to population densities, a talented workforce and public transportation is now essential for many industrial users. Buildings need new systems, appearance and functionality. Low rent uses of garment manufacturing and storage are making way for creation, new production, and ecommerce. Buildings are being adapted for higher uses.

Look for old, dysfunctional buildings with poor loading and low ceilings. They often have extensive code violations, poor life safety, non-functioning fire sprinkler, dilapidated bathrooms, and improvised break rooms. Even though these buildings are unpainted, unpaved and uncared, all are great, contrarian investments. Many new companies in the field of robotic production, custom manufacturing, food preparation, ecommerce and other creative uses fit seamlessly in old, repurposed industrial. Oakland, South Bronx, Central Los Angeles, Newark, and West Dallas are a few examples but every city has industrial in need of extensive redevelopment.

While local conditions dictate specific renovations, these buildings have similar minimum requirements. Basic refurbishment will include HVAC, plumbing, paint, ADA, bathrooms, fire sprinkler, earthquake, cleaning, and finishing. Additional value comes from adding building intelligence. Fiber optic cabling, new power grids, communal patio areas, natural light and air flow are part of a revitalized plan.  Neighborhood amenities are always welcome. In general, a simple investment platform of buying, refurbishing, and increasing rents is well overdue after decades of neglect.

Capital Divergence.

While finance is plentiful on the Institutional side, borrowing is difficult for Non-Institutional. Funds, Endowments, Insurance Companies, REITs, and Sovereigns are piling into distribution buildings and large land developments. Although spreads are favorable, it is an intensely over sold environment where buyers are competing for limited opportunities.

Conversely, non-institutional grade properties, which is majority of industrial buildings, are crippled by a lack of reasonably priced financing and availability. Even “A” locations may not meet lender requirements because of tenant quality, building age, size, condition or some other criteria that prevents the lender from either selling or retaining the loan. Reserve requirements dictate as much as 50% cash down payments especially after accounting for improvement costs.  Rates vary greatly.  Global institutions can access funds internationally for less than 1%. Most borrowers rely on conventional loans, in the area of 4.5%, but this offers minimal leverage over cap rates. When it’s difficult to borrow, a more common vehicle is the Hard Money loan starting at 9%. This divergence between institutional and non-institutional demonstrates the potential of capital availability.

Divergence in capital and returns is widely understood by investors. On occasion, institutions will drop their standards below 50,000 square feet to get more yield, but generally, larger deals are required to be efficient with large capital amounts.  Meanwhile, smaller developers, comprised of wealthy friends and family, lack scalability and are geographically bound. The big rivals in the non-institutional space are owner/users but only in cases when properties are on-market and buildings are in relatively move-in condition.

Poor Market Information

One thing that would help capital is a better source of market information. There is no universal place to trade real estate like there is for stocks or commodities. Real estate information is imperfect because it is composed of micro-markets normally geographical, and filtered by product type, size, or profile. The on-market is limited to an infinitesimally small part of the property universe at any one time. Experienced buyers trade on the “off-market” through relationships, contacts, brokers, and their own personal efforts. The most common way to search the “off-market” is by being a distinct part of the community. Establishing your reputation is still very common, with brokers, at industry events, or getting the word out directly. As an aside, local SIOR meetings can have twice as many investor/developers than brokers which is a completely new occurrence.

To combat information scarcity, large organizations have developed their own electronic tools using big data sets composed of all the properties they would like to own. Data tools are a clear strategic advantage when filtering through tens of thousands of buildings. Modest investments in search techniques using data science provides proprietary information unavailable to the general market. In addition to being a part of the on-market, it’s possible to create your own “off-market” network. For example, by focusing on industrial buildings, redevelopments, and development land, direct search techniques create opportunities that are otherwise elusive. As the “on-market” becomes overly crowded and inventory, scarce, in-house search teams are using custom computer programs as a new way to overcome the disequilibrium of market information.

In summary, lack of available property is causing many large buyers to look where they never have before. The large amount of money flowing to industrial will also reduce the inventory for Occupiers to purchase their own facilities.  The move to the “off-market” provides incentives for new techniques to locate property. As institutions dominate the Big Industrial market, it is very likely they will do the same in lower tiers. In the interim this opens a ‘buy and renovate” program for smaller developers and capital providers to find good investments and to feed larger institutional owners.

WEB VERSION

How To Make Deals For Big Industrial

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Whether you make one deal in a lifetime or several a year, Occupiers look at the Space Markets one dimensionally, fixed-in time, because they need to have doors open ASAP. Only available space will do. Most times, Occupiers do not have the luxury to leverage their space commitment on the investment side. A select few, mostly those who own their own business, use space commitments as an opportunity to increase personal net worth by turning rent expense into profit.

In the one-dimensional world, the entire market is represented by listings. And if you need to open immediately, that’s the only market that counts. Conversely, for the dealmakers, taking new space is an opportunity to earn income. You join the developer, land owner, and capital in a profit-making, multi-dimensional enterprise as we describe in our pictorial. Generally, you work off-market to leverage your Occupancy into profits.

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Many companies who warehouse and distribute are moving to the Inland Empire. You get 50% more space for the same money and the extra ceiling height is free. There will be a new wave of construction of all sizes. The best deals are presales in the early development phase. Remember to leverage your occupancy.The Move to Inland Empire

sole_occupant-850w

Warehouse and building sharing can reduce costs and maintain flexibility. Sharing has gained popularity in the tech/startup world and is now entering the mainstream. One impetus to sharing is to capture scale advantage because big buildings are much cheaper to build than smaller ones. Production industries will also share resources as a way to reduce capital investment. What Exactly is Space Sharing?

key-development-sites-850w-south-dallas

Data creates better deals. While a lot of our business is good relationships and experience, databases are essential to know the entire scope of business. We collect parcel and occupier data nationally so we can make better deals. One thing to look for is our MAPP Applicationwhere we merge the virtual and non-virtual into a deal making platform for Big Industrial. We’ll send you our log-in information by year end. Data Analytics and Industrial Real Estate

Thanks for subscribing.

Regards,

Jim Klein, SIOR
310-493-0053
jimklein@kleincom.com

(If you want to be removed from this list, please respond accordingly and we will remove you from the database)

PS: Don’t forget Gardena, California. Best place to invest in the entire U.S. for industrial infill. Ideal for ecommerce and close-in production. Sweet spot is $500,000 to $5,000,000.

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Avalon Distribution Center – 6360 Square Feet – Best ecommerce Space in Los Angeles

14438-68 S. Avalon Boulevard Gardena, CA 90248 Unincorporated L.A.County

  • 14438 S. Avalon – Total Available Space is 6360 Square Feet; 
  • Asking $1.10 Per Square Gross + $.08 CAM Fee, Monthly
  • Best ecommerce space in Los Angeles

BUILDING FEATURES: 

  • 2 Dock-Hi Positions Per Unit
  • 2 Oversized Ground Level Doors – This Unit Only.
  • 24′ Minimum Clear Height; Clear Span
  • New Construction – Completed in 2009
  • Designed For Freight and Distribution Companies
  • Concrete Yard Area – 115′ Truck Court
  • 750 SF Offices: 1 Private, 1 Large General
  • 3 Bathroom; Shop Sink; 480 V Power
  • Clear Span
  • $1.10 Gross + $.08 CAM Fee Monthly.

 

LOCATION FEATURES:

  • Adjacent to Harbor (110) and Century (105) Freeways
  • Equidistant between the Harbor, LAX and Downtown L.A.
  • Rosecrans and Avalon
  • Suitable for Air and Ocean Freight

avalon-site-plan-12-27-12-01-copy

LINK TO SITE PLAN

Site Plan in JPG

 

Contact: James Klein, SIOR; 310-451-8181 jimklein@kleincom.com

What’s New For Gardena Industrial – Fall 2016

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The Space Market is on a different trajectory than the general economy. Industrial building prices have doubled since the Great Recession and are up over 20% from previous peaks. Rents are keeping pace and $1.00 per foot Gross for industrial in Gardena and greater South Bay is becoming the norm in many segments especially for smaller units and new, Class A Buildings. All other buildings, while renting for less, are still at all-time highs. Space shortages persist across the board. A disconnect exists between a real estate pricing surge and muddling economic conditions.

There are several explanations for the dichotomy between the property and general economy, but at the heart is monetary policy and central banking. Low (and negative) interest rates allow purchase prices to be high and still provide fair relative returns. Spreads also remain generous on a leveraged basis. Lack of new development, entitlement hurdles and financing constraints contribute to the space shortage. But is this a real estate bubble? 4%-5% cap rates are better returns than you can find in other comparative investments, so rationally, property pricing has a lot of Buyer support. This is not to say prices can’t come down but when Investors need yield to pay off obligations as in the case of pension plans or insurance claims, industrial property provides dependable cash flows in an era that is starved for yield.

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Superior Infill Location

Besides financial conditions, throughout the Los Angeles area, rents are also influenced by traditional location patterns. As companies grow, they seek more space and lower rental rates. For instance, Gardena has always been attractive to Westside and Downtown Los Angeles (DTLA) companies looking to grow. Unlike distribution and warehouse companies who move to the Inland Empire for cheaper cube space, the creative and production companies have different needs. Proximity to employees, markets, and their industry ecosystem is more important than high ceilings and an abundance of docks. Older buildings, like those found in Gardena, can be attractively refurbished with natural light, green space and attention to details.

In the area of ecommerce, a growing Occupier niche, Gardena is perhaps the best location to serve all of Los Angeles. Not only is Gardena 15 minutes from both the Harbor and LAX, but upscale demographics of West L.A., Beach Cities, and DTLA are within 20 miles or less, considerably under the 60-minute benchmark that is used to judge delivery effectiveness. While docks are important for last mile delivery, large parking lots, van loading, and especially location, are even more so. Flat roofs for drone takeoffs will soon be an additional criterion because of the area’s outstanding location.

A final factor for investors in the Gardena area is the building composition. Average building sizes are smaller than many other markets. While there are still many institutional-sized buildings, 80,000 square feet is considered big and 10,000 to 20,000 square feet is more the norm. For this reason, Gardena has always been a great area for owner users, who if this were a normal economy, would always pay the highest prices. But now with a sluggish economy and a risk adverse mindset, this has opened the door to more investors to compete. Low interest rates and rent surges have given investors the impetus to creatively reposition buildings for companies heading to Gardena.

warehouse-pics-850w

Many companies who warehouse and distribute are moving to the Inland Empire. You get 50% more space for the same money and the extra ceiling height is free. There will be a new wave of construction of all sizes. The best deals are presales in the early development phase. Remember to leverage your occupancy.The Move to Inland Empire

sole_occupant-850w

Warehouse and building sharing can reduce costs and maintain flexibility. Sharing has gained popularity in the tech/startup world and is now entering the mainstream. One impetus to sharing is to capture scale advantage because big buildings are much cheaper to build than smaller ones. Production industries will also share resources as a way to reduce capital investment. What Exactly is Space Sharing?

key-development-sites-850w-south-dallas

Data creates better deals. While a lot of our Gardena business is simply good relationships and experience, databases are essential to know the entire scope of business. We collect parcel and occupier data so we can analyze it and make better deals. Look for a public release of MAPP, our application to visualize spatial relationships and real estate. Data Analytics and Industrial Real Estate

Thanks for subscribing.

Regards,

Jim Klein, SIOR
310-493-0053
jimklein@kleincom.com
klein-indus-lands-logo

(If you want to be removed from this list, please respond accordingly)

Data Analytics and Industrial Real Estate

dallas-sites

Analytic tools are essential ways to address space shortages for Occupiers or Investors. The reasons are complicated but the traditional market no longer supplies enough quality space. Online listing services do not yield satisfying choices. More aggressive tools, that emulates your precise business strategy or market expertise are needed to find deals in the era of Space Scarcity. The surest way to make deals is to create them and data is an integral part. Understanding the market comes first before developing the tools to exploit it. For instance, this is the case that better data will help you purchase Big Industrial deals…

The development side of Big Industrial is generally made up of two groups. One is the Big Entities which as a combined group owns roughly 50% of the better industrial space in major markets. They have their own capital, a stable of Occupiers, and control land and buildings. They are generally public companies and receive institutional finance who need internal returns to pay to shareholders or claimants. Performance is benchmarked to market indices. At the Big Entities, real estate is normally held to generate income for stable returns and property is only for on limited occasions. Yield is the end game.

The second group are the entrepreneurial developers who can come from different backgrounds. They include Big Entity veterans, land owners themselves, and opportunists with a taste for risk. They each have an expertise in market specialization, build-to-suit, capital relationships, or a low land basis. Because of the diverse backgrounds, there are different profit motives. The entrepreneurs hold or sell depending on their best choice at the moment. By skewing Big Industrial data, we can focus on merchant builders who are seeking profit.

The Occupier market is similarly constructed. The majority of occupiers want leased space and have no interest in ownership equity. They are not rewarded for owning property and in many cases punished by stockholders even if the numbers make sense. At the same time, there is a much smaller sub-group of Occupiers who use real estate to increase net worth. These are mostly tightly held companies or family run businesses who leverage their occupancy into favorable real estate returns. Data analytics can optimize the relationships between merchant builders and occupiers who can anchor the deal. To improve overall performance, additional analytics can be run on the entire team involved in the real estate deal. Often this will include the land seller, developer, broker, investor(s). lender, occupier(s) and buyer.

This amount of data, especially on a national basis, can only be done by coding. Investors are A, Occupiers are B, Developers are C. Sellers are D. Brokers are E. There are also codes for geography, size, industry and preference. More data generally will deliver better results but only to a certain performance hurdle. It’s really no different than what a smart dealmaker does in his head but data science is able to increase the scale without diminishing the contribution of relationships, experience and street smarts.

By the end of the year, we will be making our MAPP program public. It’s a program we developed that combines data and spatial information. It was designed in particular as an acquisition tool to help buy property. I use MAPP for infill land sites, Gardena, and Big Industrial Nationwide. I can see all US ownership, who leases, and how much space they occupy. By running relationship queries MAPP can make predictive analysis about who would be right for a given site. There will be some interesting platform economics to get buy-in from participants but I’ll explain how I hope that will work on another day. For now, if you are looking for industrial real estate deals, I have the data.